Trump and Cuomo denounce pharma even as insurers spend less on drugs

CareConnect loss widens to $156M

CareConnect, the insurance arm of Northwell Health, has grown its membership tenfold since it launched on the state’s health insurance marketplace in 2013, but its losses continue to pile up. Last year’s shortfall was $156.2 million. CareConnect Chief Executive Alan Murray blamed the losses on the federal risk adjustment program, which transfers money from insurers with healthier members to those with sicker ones. “If not for the risk adjustment program, CareConnect would have had a very successful year, with strong membership growth and appropriate medical expense ratios,” Murray said in a statement to Crain's. The company, which has pleaded with regulators to reform that process, scored a victory in September when the state Department of Financial Services issued an emergency regulation "to rectify certain unintended consequences" of the program. That led to vast sums of money flowing to UnitedHealthcare’s Oxford Health Plans from the startup CareConnect. CareConnect has threatened to leave the market if the problem is not fixed. It is most acute in the small-group market, in which CareConnect paid out about 45% of its premiums in risk adjustment payments, Murray said. Revenue at CareConnect nearly tripled to $361.1 million, but total expenses multiplied more than sixfold last year, to $518.6 million. CareConnect has lost $227.5 million since its founding in 2013. —J.L.

Law enforcement conducting unannounced hospital visits

State law enforcement officials have been showing up unannounced at hospitals in upstate New York—and they might soon be coming to New York City facilities, too. The checks are a response to security threats made by pro–Islamic State media against hospitals in the West. The unannounced visits are part of Gov. Andrew Cuomo’s Operation Safeguard, which last year tested the emergency preparedness of more than 600 New York businesses, including hospitals, to see whether employees would report suspicious activity. Federal security agencies urged hospitals to watch for unusual behavior, such as photography of security cameras or unexplained requests for information about entry areas. The spot visits are not confined to hospitals; arenas, colleges, shopping malls and other locations where people gather were evaluated as well. Hardware stores and other retailers that sell chemicals or components that could be used in improvised explosive devices also were tested. A spokesman for the Healthcare Association of New York State said it is the first time in recent memory that plainclothes officers have conducted security checks at hospitals. “The takeaway is for people to not be afraid if they see something suspicious [but] to report it,” said a spokeswoman for the state Division of Homeland Security and Emergency Services.—J.L.

Single, profitable and open to partners

South Nassau Communities Hospital is open to partnership talks with major academic medical centers, said Mark Bogen, the hospital's chief financial officer, even though he said insurers would “prefer to see as much competition on Long Island as possible.” The Oceanside, L.I., hospital has been working to attract quality primary-care doctors and specialists to its physician network, Bogen said, but has struggled to find doctors who are still independent. “The board will always talk to folks who can provide us access to higher quality and more expansive health care to deliver to the communities we serve,” he said. Although South Nassau has some bargaining power as a member of the Long Island Health Network, it could command higher reimbursement rates if it were acquired by a larger system. The hospital’s improved financial performance in 2016 might put it in a position to attract a health care giant with greater negotiating power. South Nassau has expansion projects in the works and recently embraced the shift toward value-based care with the launch of the New York Medical Partners accountable care organization, which serves more than 8,000 patients. “I believe that the usual suspects would have a great interest in talking to us,” Bogen said, “and certainly we would entertain listening.” So far, he added, “There’s nothing officially in the fire.”—C.L.

AT A GLANCE

WHO’S NEWS: Timothy Nolan is the new executive vice president, chief revenue and health care delivery officer at EmblemHealth. Nolan, who has more than 30 years of experience as a health care executive, most recently was president and chief operating officer at Independent Living Systems, a Miami-based managed care company. He has also held leadership roles at Meridian Health in New Jersey, Coventry Health Care in Maryland, Aetna and U.S. Healthcare.

HEALTH SUMMIT:Crain's is hosting a spring health summit on the Future of Behavioral Health in New York State, which will take place in Manhattan on May 9. The lineup so far includes speakers from Mount Sinai Health System, Healthfirst, the Institute for Family Health and New York Harm Reduction Educators, among others.

Trump and Cuomo denounce pharma even as insurers spend less on drugs

President Donald Trump wants to “bring down the artificially high price of drugs and bring them down immediately,” he said in his speech to a joint session of Congress last week. Railing against drug prices is a bipartisan pasttime. And though the president has flip-flopped on the issue, his latest stance aligns him with Vermont Sen. Bernie Sanders and more recently Gov. Andrew Cuomo.

But a Crain’s analysis of the most recent financial statements of several New York health insurers found something peculiar: Drug spending by health plans last year went down or did not keep pace with increases in membership compared with 2015.

Crain’s findings surprised Barry Schilmeister, a principal at Mercer, a Manhattan-based benefits consultant. Mercer found in its 2016 survey of employer-sponsored health plans that large companies experienced a 7.4% increase in drug benefit costs in 2016, with specialty medications for complex diseases, such as rheumatoid arthritis and hepatitis C, comprising much of the increase.

“I would not expect total spend on pharmacy to be going down,” Schilmeister, said.

Insurers say they are still experiencing an increase in drug prices. But they are getting better at managing their own spending by moving toward generic drugs, using pharmacy benefit managers, such as Express Scripts, to save on high-cost specialty drugs, and shifting more costs to consumers through high-deductible health plans.

The question is whether insurer’s savings are being passed onto employers. Benefit cost per employee rose just 2.4% in 2016, according to Mercer’s survey, one of the lowest increases in decades. But that is also because employees are paying more of the cost in the form of high-deductible plans.

That doesn’t mean insurers will let up on their push for politicians to pressure Big Pharma. Insurers are lining up behind Cuomo’s effort to set price ceilings on certain high-cost drugs and impose a surcharge on pharma companies that charge Medicaid or commercial insurers for prices in excess of the cap.

"We’re doing everything we can to control drug costs for our members,” Emblem Chief Executive Karen Ignagni said. “But we continue to see very significant increases in drug prices, both nationally and with our membership."—J.L.

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